By Gareth Vaughan
BNZ says it's keen to lend money to businesses and home buyers with the caveat the businesses have strong fundamentals in place and the would-be home owners have solid cashflow and good employment prospects.
Andrew Thorburn, BNZ's chief executive, told interest.co.nz that the most significant factor the bank noticed in its financial year to September was a lack of businesses investing. BNZ released its annual results yesterday and figures from its parent, National Australia Bank (NAB), predicted a 2.5% fall in system-wide New Zealand business lending this year. Alongside a forecast 4.1% fall in personal lending and 3% rise in housing lending, NAB forecast just 0.5% total systems lending growth this year.
Saying system credit growth in New Zealand had "stopped", NAB predicted just 0.4% total lending growth next year and then 3.5% in 2012.
In the business sector Thorburn acknowledged companies had been deleveraging, which in principle he said was a good thing. Earlier this year BNZ said it had relaxed lending criteria for small businesses, which it defines as companies with annual turnover of up to NZ$1 million or five or less employees. This, the bank said, led to a sharp turn around in the number of loan applications it was approving and a lift in BNZ's small business market share.
However, Thorburn said credit settings for mid-sized and larger businesses over the last 18 months hadn't changed much, and there were no plans to ease them.
"What we do need to say is we want to bank businesses that are ready for growth and being run well and have got the basics in place," said Thorburn.
"We’ve seen banks around the world, where they have deviated from that principle, that’s where problems have emerged. We’re certainly keen to grow, we’re certainly open for business."
"(But) what we’re really saying to businesses is 'look, you need to have your business fundamentals right. You need to have a clear business plan with a clear proposition about what is your competitive advantage. You need to have cash flow and financial forecasts, you need to have good governance and you need to understand some scenarios that may go against you and how you’d handle them'," Thorburn said.
BNZ was making it clear to customers and potential customers what it needed from them and why. This was good for the businesses, the economy and BNZ over the short, medium and long-term, Thorburn added.
"I think what we’re doing in doing that for New Zealand is really supporting businesses to get on the right footing so that over the course of the next two, three, five years we’ve got businesses that are going to continue to be sustainable and win, not just have a short term kick up."
As for the housing market, which accounts for 47% of BNZ total lending portfolio, Thorburn said the overall market had grown 3% this year with BNZ a little ahead of that. He predicted 2-3% systems growth next year. The latest Reserve Bank data shows total business lending down 6.6% year-on-year in August at NZ$72.3 billion with housing lending rose 2.4% to NZ$169.4 billion.
'Room to grow in housing'
Thorburn said BNZ remained keen for mortgage market growth with the "right" clients.
"Where there’s good positive cashflow and where we’re able to acquire new to bank clients because our market share in housing is about 15-16% so we’ve certainly got some room to grow there," he said.
The "right clients", have cashflow and good employment prospects, especially given the latest official unemployment level of 6.8% and forecasts for it to remain above 5% next year.
Reserve Bank data shows mortgage approvals by volume down by 25% year-on-year for each of the last three weeks and 27% by value. Against this backdrop, ASB, ANZ, National Bank and Westpac are going the extra mile to try and entice home buyers into the market and incentivising mortgage brokers to bring them business.
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